The electronic cigarette market has witnessed a big event at the end of the year — One of the biggest tobacco giants Altria Group is reported to invest $12.8 billion and take a 35% stake of JUUL, the most influential e-cigarette brand in America e-cig market. In the agreement, JUUL will remain an independent company and get the full support from Altria including the top shelf space in convenience stores, ads inserted in packs of cigarettes, and distribution and logistics assistance.
According to the statistic published by Centers for Disease Control and Prevention, the Food and Drug Administration, and the National Institutes of Health’s National Cancer Institute, cigarette smoking has reached the lowest level among US adults. In 2017, a slight drop in cigarette smokers among adults from 15.5% in 2016 to 14% in the US. While on the contrary, the market of the e-cigarette products is substantially expanded. Though there are some analysists states that Altria has been paying too high of the price, other professionals hold different opinions. Stifel claims that the deal may help Altria “address the changing consumer attitudes toward nicotine.”
Apart from this purchase, Altria also announced its cost reduction plan includes layoffs and third-party investment reduction. “We are taking significant action to prepare for a future here adult smokers overwhelmingly choose non-combustible products over cigarettes,” said Howard Willard, the Chief Executive of Altria. By making good use of JUUL’s brand influence and market share, Altria aims at taking a more positive position in the market.
With the increasing awareness of health risks and the development of vaping technology, people tend to turn to electronic cigarette because of the less harmful and cancer-causing molecules in vaping. According to P&S Intelligence, e-cigarette industry is estimated a compound annual growth rate at 19.6% during 2018 to 2023, in which pod system presents a tremendous growth potential and the prospect of expansion. JUUL, an ultra-portable electronic cigarette device of closed pod system, has become the most popular e-cigarette product in the United State and is now taking 75% of the market share. Its characteristics of portable, simple, and user-friendly make it convenient for smokers to quit smoking. JUUL’s pods including Virginia Tobacco, Fruit, Mint, Mango and four other flavors have gained its popularity among youth and bring up a fashion for pod system.
Except for JUUL, some popular pre-filled pod system brands available on the market are Vuse, Hexa, Blu, and SMOK. Their competition on flavors, design and user experience are promoting scientific and technological progress and a new trend of cooperation, such as the recent Golden Leaf Awards Winner —— FEELM tech, another new vaping technology that has great development potential. Unlike Altria and JUUL, FEELM concentrates on the vaping technology innovation and provides complete pod solutions for e-cigarette companies. Until now, FEELM has cooperated with some brands includes Hexa, Relx and Dot Vape Kit.
So which kind of cooperation can better adapt to the market? Can Altria redeem itself as expected? What will FDA do towards this combination? Whatever the future is, we can now sure that JUUL is now one of the most valuable privately held companies in Silicon Valley.